I am a long-time Fool (10+ years), lurker mostly, but need the help/expertise of the MF community. Sorry for the long post, but I really need the collective wisdom of this Board and I want to give as much information as possible.

We are now approaching 50k in credit card debt. I feel so stressed/depressed/angry that we have gotten ourselves in this situation that it has affected my outlook on life, put stress on our marriage, and is generally consuming me. I am 50 this year and never thought I’d be where I am now. But I didn’t come here for pity and wouldn’t expect it from folks on this Board anyway.

I am a professional with a decent job, my DW works also, my DD is a freshman in college, and my DS is 13. How did we get so far in debt? Basically, we have lived beyond our means, and made some poor decisions. This debt has built up over the course of about four years. Big ticket items adding to it: (1) Vacations. Almost every year we have flow out West (we live in the Northeast) to visit my elderly MIL. They have been expensive trips and it has all gone on the credit cards. We also have generally taken a summer vacation to the beach. Also on the credit cards. (2) We have had several expensive repairs on our older car (10+ years). It’s all gone on the credit cards. (3) Our cat and dog have had health emergencies. Also expensive. Also on the credit cards. (4) Finally, generally living beyond our means – overdoing it at Christmas, using the cards to buy stuff we can’t afford at the moment, and then not paying off the CC balances.

Unfortunately, the pattern has been the same for the past 8-9 years. We have spent beyond our means by about +/- 10k a year. Once the debt gets really uncomfortable 30k – 40k we “do something”. The past two times we “took advantage” of the rapidly increasing value of our house and did two cash out refinances of our mortgage. (I am sure this will raise the ire of many on this board). Paid off the cards, felt better, then fell back into poor habits.

Our backs are up against the wall. Before I throw all the ugly numbers at you, let me say what we are doing:

• All the credit cards have been stashed away, with one left for real emergencies.• I have organized, caught up on filing, and can put my hands on everything financial.• I am finally looking very closely at where all the money is going. This month (September) we are tracking every penny.• Started paring back spending, low hanging fruit – magazine subscriptions, Netflix, etc.• Read all that I can find on this Board.• Started selling off some items to try to generate more cash.

Here’s the “budget” which I have been using for several years, which now a bit more educated I realize is no budget at all. The final “household” amount was the “not exceed target” for our weekly/monthly spending. But that was as far as the “budget” went and we often exceeded the “target”. The numbers for the “expenses” are averages based on one year. I have money automatically transferred to a bill paying CU account to pay the “expenses”, same for the mortgage & taxes, car payment and the meager savings. Nowhere in the budget is money to pay down credit cards balances, nor have we spelled out any detail in the “household” amount..

Some comments. The retirement line is a mandatory contribution to my defined benefit pension plan. I can “retire” with full benefits in 9 years. The oil is not a typo. We heat house and water with oil and live in the Northeast. We belong to a co-op and the 4+k is our estimated oil consumption for a year. We have a plan where the price is capped, but we will pay no more than the cap but get the going rate if that is less. So far it looks like we will come in well under this amount, as oil has come down and we will be consuming less with DD at college. They will adjust the amount in January. But for now we are stuck with $400 a month.

I have been paying the minimum with money with our now almost depleted “emergency fund” (about $4,000 left). Once that’s gone I am not sure what we will do. I have been the king of balance transfers and all the cards with low rates will hold that low rate until balance is paid off.

A few comments. The dentist line is paying for DS’s braces and will be done early ’09. The huge gift amount in June was a laptop for my college-bound daughter. The huge “clothes” in July was probably gifts as we had two birthdays in July. September should be a better comparison month as I am tracking everything and will be able to do a better job categorizing.

Well there it is. I have bared all. Basically I know we need to establish a budget and stick to it. Any feedback on this would be appreciated (what’s a reasonable amount for a family of three, with teenager)? Second, I need to figure out how to meet at least my monthly obligations for our debt without drawing from the emergency fund (or retirement assets). And what strategies might we use to tame this monster (e.g., debt consolidation through my CU?). I’m desperate and need a “plan” to cling to. Any and all comments welcome. Thank you in advance.

Well, first step is gathering info - and it sounds like you have a good start on that!

Here are a few thoughts, most of which you probably already know:

1. $3K for household/misc is obviously the big elephant in the room, and it's good you are trying to break it down. At that $, it is twice your mortgage, which is crazy.

2. Food/Household at $1752/month is way, way too high, and it doesn't even include eating out? This is a place you are hemoraghing money. You should target groceries at $400-$500/month (many people here do a lot less, but since you don't even know where you are at, it's a place to start), and household misc at $50 - $100.

3. Personal supplies - what is that, that's not covered elsewhere? Sounds like a slush fund to me, or a cash hole. Target a small amount as a "fun" fund for both of you and hold to that. $50? $100? Way less than $500/each at any rate.

4. No budget for "cash fund." That's not a budget type, it's a method of paying for other budget categories. Like a said, establish a "fun" allowance for each of you and hold to that whether it be paid in cash, check or green stamps.

5. Travel has to go for a while. Maybe just one of you goes to visit MIL annually and no other vacation?

If you haven't already, you need to tell your children about the amount of debt you're in. Not only as a lesson for them, but so they can find ways to contribute -- even if their contribution is just not adding more to the family debt. You all got things out of LAYM, so you all need to sacrifice a little to get out of debt. For your colleged aged daughter, this could mean getting a p/t job if she doesn't have one already so she has her own money instead of asking mom and dad. For your son, this could mean helping around the house, such as with cooking meals.

I would cut cable, but I'd probably keep the internet because, well, because I need the Fool!

Hair cuts/personal care $60.00 $141.95 $20.00

I'm not sure what's going on there. I usally lump haircuts/personal care with Personal supplies. What I mean is my daughter's haircuts and hair ties and our shampoo, conditioner, razors, toothpaste, etc are all lumped together. But I also cut/color my own hair.

I usually have some "household" items mixed in with my groceries, meaning dish soap, sponges, cleaning supplies, etc.

1. How are you paying for your daughter's college?2. The expensive trips to MIL either have to go, or have to be greatly decreased in cost, or have to be saved up for in advance by cutting other expenses. Next summer could you possibly pay for your MIL to come and visit you?3. Can you get rid of the car that has the expensive car loan and you still owe $20k for it?4. Food/household looks huge unless household is including things like repairs. Around here our food/household is basically food + household supplies that we buy at the grocery store. What is included in your category.

FWIW with 6 of us in our house we spend about $1500 a month and everyone here keeps telling me how much that is (and it does include dining out and school lunches). With 3 now in your household I would be looking to cut your amount by at least $1000 a month.

5. Basically though I think you have a lot of room where you can cut since your mortgage is relatively small. I see a lot in the budget that is nice...but not necessary and can be cut. Everything from camp to sports to newspaper to travel, etc.

I'm not going to yell at you, because you're clearly yelling at yourself. And you're right when you say that the board distrusts easy-out methods of paying credit card debt, such as transferring the debt to the house, for exactly the reason that you mentioned: without a change in habits, the debt just runs right back up again.

You've gotten a good start. You've put away the credit cards, you're looking at the debt instead of pretending it will go away, you've done the necessary filing, and you're starting to take a close look at expenses.

Gas looks high to me. How long a commute is involved, and is there any chance of switching to public transportation? Or car-pooling?

Vacation/travel. Slash. Down to zero.

Consider it this way. You have a limited amount of resources (i.e. money). When you have a limited resource you need to put it toward the most crucial necessities. And the necessities are shelter, food, utilities, medical, transportation to work (so you can pay your bills), and taxes.

Do you reset your thermostat so the house is cooler during the day while you're out? (Or warmer, depending on the season). Have you and DW checked places like Tightwad Gazette?

Your immediate plan should be to slash your spending. I'm not the best person with figures, but I can see a lot of areas where you can tighten up. Entertainment? Down to zero until you can pay the minimums and a little more out of current earnings. Read books. Go for walks. Borrow movies from the library. Talk to each other.

Donations? Down to zero until you can pay the minimums and a bit more from current earnings.

That needs to be your first concern: that you cut expenses until you can pay all the current bills, and the credit cards, and all the other debts, out of each month's earnings, with enough left over to start your snowball. By the time you've done that the bleeding will have stopped, and you'll have a chance to think.

Do you understand the snowball system? You pay the minimums on most of the cards, but select one card to snowball. So you pay the minimum and everything else you can scrape together toward that one card. It can be the highest APR, or the smallest balance, or the one that gives crappy customer service. And when that card is paid off you move to the next. If you go in order of APR you'll save more money, but some people like the idea of paying off the smaller ones first, so as to get some maneuvering room.

This is doable. A lot of people have had much worse problems, and they've been able to stop the bleeding and cut back, and make headway on the debt. You have a good income, your mortgage is a lot better than many others, and you want to change your ways.

Hang in there, and keep posting, even when a lot of people are throwing advice at you. Sort out what you can use, consider the rest and set it aside.

Get on a cash budget, live on beans and rice - rice and beans, sell so much stuff your son thinks he's next (garage sale and eBay TODAY), list your debts smallest to largest, pay minimum payment on everything but the little one which you attack with everything you have, the only restaurant you see the inside of is if you are washing dishes there, Christmas is crafts, no vacations - get *hard core*

You are either in for long term medium pain or short term severe pain.

It's like a band-aid, just rip it off all at once instead of prolonging the pain. DS and DD are going to get severe lifestyle adjustment anxiety. That's OK.

You will feel so much better once you get the snowball rolling! And you *can* do it, it's just going to take a little time. Not as much as you think.

1) Visits to elderly MIL. If she's healthy enough and well-off enough to visit you instead (on her dime), obviously that would be best. However, "elderly" to me implies that she's frail, and in my family one hates to deny an old lady's request to see the grandchildren, because if she dies after you've said "no," oh the guilt! In your case, I think a good compromise would be for your wife to visit her mother alone, and bring pictures (maybe videos) of the children, of course with profuse apologies for not being able to afford to bring the whole family "this time."

2) Pet health "emergencies." I understand. I had a mental ballpark figure of $1k as a limit to how much I would spend on our dog in an emergency, but when the time came it was $x for diagnostics, $y for treatment, etc, and the total came to $1,500, which I gladly paid. She was only 8 years old, and it was a one-time surgery, after which we could anticipate another 5 years minimum with her. Later, when she was diagnosed with a chronic ailment, I put her down. Could have gotten a few more weeks or even months out of her, but she was uncomfortable. It broke my heart, but it didn't make sense to drag it out. A person can be enrolled in Hospice, but there isn't a Hospice equivalent for pets. Anyway, for future emergencies, be prepared to make difficult decisions.

3) Christmas. You're in luck. Your children are old enough that they no longer believe in Santa. If they are really attached to the tradition of having stuff under the tree, that stuff can be toothpaste, powerbars, mittens, etc. If they can forgo the presents, then a nice family dinner would be perfect, especially if they help with the menu planning and the cooking.

4) Clothes, camp. You're in luck. Your youngest is almost 14, at which time she can get a work permit. Even before that, she can babysit for neighbors. Once my kids hit about 13, DH and I told them, "We'll pay for necessities, you have to pay for everything else. Specifically, we'll take care of food, shelter, and education, but you have to use your own money (from part-time jobs) for non-school activities (movies, birthday gifts for their friends, dinners out, etc.), computer games, clothes (over the clothing allowance amount), etc."

Well, you are off to a good start just getting everything written down.I think there probably is a lot of leakage in this "household" category.I would suggest you and DW both get a notebook and for the next few months write down every penny you spend--where it goes and how much.

We have a DD in college, too. I lump groceries, personal stuff like shampoo, and household stuff including stamps & cat food, all into my grocery budget (puts on flame retardant suit and ducks) and we spend about $600. Under the circumstances I would stop eating out and having you, DW and DS brown bag lunches. I also would cease making donations until such time as you have a debt payment plan in place.

Like determinedmom, I am interested in DD's situation. I didn't see any expenses for her--other than the laptop. Are you paying her expenses? Where is she living--since you asked for a food budget for three? Transportation costs? Does DS get an allowance or paid for household jobs?

Can you pay off that $79 balance in September? I know it isn't much but it would give you a feeling of satisfaction that you have gotten one card out of the way. You can then direct that $15 minimum payment to the next card on the list rather than spending it. Also do that when you finish paying the ortho bill.

If you haven't already done it, I would develop a spending plan for September and also one for October. Put mortgage and fixed utilities first, followed by the minimum for the cards, and then see where things are. If that leaves you with only $400 for food, then so be it. Make it work. I am guessing DW does grocery shopping? Tell her to check out www.gorcerygame.com or www.couponmom.com to see if those sites can help reduce the grocery bill. Works for some people. Also if you are like me, you probably have an overflowing pantry. Have a week where you don't shop but eat from what is in the freezer or pantry--tuna sandwiches, baked beans on toast, pb and j sandwiches (if you aren't allergic), soups, etc.

Kudos to you for posting! Here are a few things which caught my eye - most of the suggestions are things I've seen on other posts.

Electric $130.00 $1,560.00

$130/month seems high. Have you run through the drill on reducing electricity use? Turn off lights in empty rooms, always turn off monitors, reduce TV use, switch to cfl's etc, etc, etc? Just turning off our monitor made a noticeable difference in our bill.

Phones - Cell $100.00 $1,200.00 Phone - Landline $80.43 $965.16

Do you *need* both a landline and cellphones? If so, have you considered a VOIP service such as Vonage? $25/mo is much better than $80. You can keep your current phone number.

Cable & Internet $107.70 $1,292.40

Can you cut your cable back to basic?

Oil $400.00 $4,800.00

Insulation? Plastic on the windows and rope caulk around doors and windows can work wonders. Do you keep your house on a programmable thermostat? Can you keep the thermostat lower this year?

Insurance - Auto $136.07 $1,632.80 Higher deductible?

Water $55.96 $671.52 You might find it worthwhile to ask everyone to really think about how they use water. Things like turning off the water while brushing your teeth, shorter showers, not leaving the water running while doing the dishes, and so on can add up as well.

Unfortunately, the pattern has been the same for the past 8-9 years. We have spent beyond our means by about +/- 10k a year. Once the debt gets really uncomfortable 30k – 40k we “do something”. The past two times we “took advantage” of the rapidly increasing value of our house and did two cash out refinances of our mortgage. (I am sure this will raise the ire of many on this board). Paid off the cards, felt better, then fell back into poor habits.

It doesn't raise my ire, although it should have been a warning sign to you. Did you get a 30 year fixed mortgage? If not, when does your payment adjust? Because that's something that you need to plan for, too.

If you did get 30 year mortgages each time, just realize that not only did you increase your payments, you lengthened the time that it will take you until you have a paid off home.

I have reformatted your numbers, and totaled them in a different way, focusing on the monthly amounts:

The first thing that pops out at me is that in this 'balanced' budget, you have not accounted for any debt repayment, other than your car payment.

The second thing I noticed is that it looks to me like you are "assigning" whatever income is left over to the "Household" category in order to make the 'budget' balance, rather than actually determining how much you are spending.

You do attempt to fix that issue by breaking down the "Household" spending for 3 months. However, that spending still does not include any debt repayment, plus, your 'accounted for "Household" spending' is between $1,141 over and $2,649 over your "Household" budget in each month that you have accounted for. The average for these 3 months is $2,078/month over the 'budget'!

Add in just the minimum debt payments of $859/month, and you are overspending by $2,937/month - that's a LOT higher than your perceived overspending issue of $10k a year. Even if you just take the lowest month at $1141, plus the debt payments of $859/month, you are overspending by $2000/month - which is nearly 2 1/2 times your percieved overspending of $10k/year.

Each month that you have broken down and tracked, you seem to have a different reason why 'this month is a lot higher than normal' - the problem is, something like that probably happens every month, and this level of overspending is normal.

Plus, other than the laptop purchase, I see nothing in the plan for DD's college costs. Do you have savings set aside for those? If not, how are you planning on paying for them?

Basically I know we need to establish a budget and stick to it. Any feedback on this would be appreciated (what’s a reasonable amount for a family of three, with teenager)? Second, I need to figure out how to meet at least my monthly obligations for our debt without drawing from the emergency fund (or retirement assets). And what strategies might we use to tame this monster (e.g., debt consolidation through my CU?). I’m desperate and need a “plan” to cling to. Any and all comments welcome. Thank you in advance.

Well, it appears you've been living above your means at somewhere between $10k and $36k a year, so that's somewhere between $1k/month and $3k/month that you need to find in income and/or cut in expenses.

The interest you are generating on your credit card debt is about $335/month, which means that you are paying down principal at about $560/month. In order to pay off your debt in less than 4 years, you will need to come up with an additional $500/month or so to add to your debt payments.

So, you need to increase your income and/or decrease your outgo by somewhere between $1500 and $3500/month.

Obviously, even your 'budgeted' household spending at $3,021/month would be a huge target - your 'actual' household spending of $4,162 or more a month is an even bigger target. If you can get the actual "Household" spending down to $1500 or less, that would help a lot. If you can't get the household spending down that much, then either you or DW, or both of you, probably need additional and/or better paying employment.

Specifically, in your expenses:

$180 for cell and landline phones, plus $108 for cable/internet, plus $17 for newspaper? That is over $300/month. You should try to get this total down to $100 or less.

As far as 'Donations' go - at this point, you can't afford to donate. You are essentially paying interest on every dollar you donate.

Food/Household/Personal Supplies seem pretty high, depending on what you are accounting for there - more breakdown of this category may help you figure out what can be cut from this.

Just let me point out, that it's not "what's a reasonable amount" for other families of 3 - it's what needs to occur for your family. You have $49,153 in debt at an average rate of 8.18%.

To pay that debt off in 4 years, you need to make payments of at least $1205 a month. 3 years would be $1545/month. This assumes that the rates don't increase, and you don't have to pay any more BT fees. If any of your rates are going to expire, or if they are variable rates and interest rates start increasing, your monthly payments will need to be higher.

In your case, actual "Household" spending needs be less than or equal to $3022, including debt repayment.

So, if you want to take 3 years to pay off your debt, the $1545 in monthly debt payments will leave $1477 for "Household" spending.

A 4 year repayment plan of $1205/month would be $1817/month for "Household" spending.

If you are willing to take 5 years to pay off the debt, you could drop your payments to $1001/month, and spend $2021/month.

If you continue to make only the $859 minimum payments, you will probably pay the debt off in a bit over 6 years, and be able to spend $2163/month.

So, you tell us - how long do you want to take to repay the debt? That sets the 'reasonable' limit for your family's spending.

If you increase your net income, or decrease other expenses in your list, you could increase your "Household" spending, or you could make your debt repayment that much faster.

In any case, you need to drop your "Household" spending significantly from the $4163 - $5671 that you spent each of the last 3 months.

Higher deductibles are dangerous when you don't have cash reserves. I took a big hit a couple months ago when daughter ran into the side of the garage, because I had $1000 deductible on the car and $1000 deductible on the homeowner's insurance, and I had to cover both deductibles.

Now, having $1000 deductible *is* more cost effective for me, over time, than my previous deductibles of $250 on the car and $500 on the house; but I have a hard time recommending $1000 deductible to someone who can't just pay the $1000 in the event of a loss.

Your utilities seem VERY high. (Our families make about the same income and we, too, live in the Northeast so I can really relate to your posts.)

If you aren't willing to completely drop the landline call up the phone company and ask to switch to message rate service. My phone bill is around $25 a month for message rate.

Consider hauling your own garbage/recycling to the dump. We have garbage service but if I needed to free up every cent available I'd be making a weekly trip to dump my own garbage.

I second the suggestion to take a good hard look at where you are spending $130 a month on electricity. You have a teenage boy. I assume you have at least one gaming console, at least one computer on, and at least a couple TVs in the house. Put the TVs on a power strip and turn the POWER off, not just the TV. This was a huge savings to us when we started doing it. Apparently this one TV just sat there waiting to be turned on - and was never not using power. Make sure your son is using either the computer, or the TV, or the gaming console - and not burning loads of electricity as each of the entertainment types sits waiting for his attention.

Also, I know you are stuck with the cost of the oil for now but do whatever you need to do to conserve. No one should be hanging around the house without a sweater and socks on. Add an extra blanket to the beds at night and turn the heat WAY down. It may shock you but in upstate NY we have the night temp around 58-60, day temp at 62. On the weekends if we are home we MAY raise it to 64 but we are more likely to warm up with hot tea, cooking a roast, etc. (We make up for it by keeping our house between 65-68 in the summer but that's another story!)

As others have mentioned, food is an enormous expense in your family. There are just the two of us but we are big eaters and big foodies. I don't have an exact number but our food bill runs around $600 a month - and we eat 20 of 21 meals at home every week. When we do eat out it's usually breakfast at Panera - using a free gift card we get with credit card points (we don't carry a balance).

How do I stretch the food dollar? Well, I love my crockpot. I cook based on what is in season and I do a lot of cooking ahead and having things ready to go in the freezer. This pretty much eliminates the need to get takeout during the week. Your son is old enough now to make pizza with you as a new Friday night tradition - and a homemade pizza is going to save you around $12 every time you don't order out.

Gifts and donations are tough because I am a generous person AND I a private person and I'd rather the entire world not know I am struggling to meet my financial obligations. I suggest that you and your wife get creative. If you used to bring a nice bottle of wine to friends when you socialized try bringing a homemade banana or zucchini bread instead. Bake cookies to thank the neighbor for watching your pets. Have your son bring $10 Dunkin Donut gift cards for gifts or better yet, if you have AAA, pick up discounted movie passes to use as gifts. You will still be laying out some money but a lot less than buying a video game or something.

As for clothes - lucky you that you have a boy! Steve and Barry's at Colonie Center is having an enormous liquidation sale. You could outfit your son for an entire year for about the cost of one full price outfit.

While the downside of debt is stress and anxiety and all of that the upside is that it will force you to become closer as a family. Spend more time together. Interact more. Be more honest with each other. It isn't going to be all fun times and butterflies but it isn't all doom and gloom either. You can do this! Good luck to you!

1. Newspaper. First, you're killing trees, burning gas to deliver it, etc. Read it online, get your coupons online. 2. Considering your electric bill does not include your heat, that is high. When was the last time you cleaned your A/C filters? Checked your window and door seals? Have you switched any lights to CFL? Does your whole family follow the "turn it off behind you" rule? Is your hot water tank running off gas or electric? If it's an older model have you put a blanket on it? Turned down the heat? Cleaned it recently? Do you turn computers off when not in use? 3. Drop the landline. You have cell phones.4. Cable/Internet: drop everything except the basics. You might want to drop cable entirely. Many shows are now available online to watch.5. Auto Insurance: Review your policy, especially if you haven't shopped it in a while. Oh, and any dependents on the policy better be ponying up some cash to cover it.6. Sell the car and buy a complete beater. Getting rid of that loan will be a big help.7. Camp fees, etc. Nope. The answer to "mommy & daddy can I?" is NO. Heck No. Not a chance in heck, No. Sorry, but we can't afford it. Period.8. Set a firm limit on eating out. Figure out what it would cost for a once a month dinner for the family and round up a little. That's it. Once a month the family goes out for a nice dinner, want to eat out more then that, well that means cheaper restaurants at lunch.9. Gas is also a high one. Find public transportation if you possibly can.10. Christmas this year is going to be immediate family only and stocking stuffers/homemade only. Co-workers, secret santas, etc are straight out. The rest of the family and friends should be just told "we're scaling back this year and not exchanging gifts." Believe me they will be secretly exhaling sighs of relief. There needs to be a set limit on gifts that you and your spouse both agree on when it comes to family. My husband and I both agree on $50 or less per present when it comes to birthdays/anniversary/wedding presents, mainly because we both have so many relatives we get hit with multiple events per month.

I agree that food/household is a huge category and needs to broken down. If someone is paying way too much for department store facial cleaner how would you know?

I would also push that you or your spouse need a second job. Even if you just work 2 nights a week or just the weekends, the extra money would make a difference. Obviously you won't make near what you make at your regular job, but it's money.

Check on your prescriptions to see if they might be cheaper than what you're paying - I've had one change prices a few times this year even at the "cheap" places - check things out here : http://boards.fool.com/Messages.asp?mid=26965141&bid=118.... Sometimes it can be cheaper to buy outside of insurance and cheaper even than the mail order through insurance.

Travel costs can vary widely and it can take a little work but you can save big. We recently flew to Boston (we live in Denver) for a vacation and ended up flying out of Colorado Springs because RT from there was $248 and RT from Denver was $670. It seemed a tad less convenient but as it turned out the Springs airport was easier and parking cheaper. Whenever I fly(for work or pleasure), I check fares at different times and on different days. Even on the same day, flying at different times can add over 100% to the fare.

The home heating costs are inevitable - digital thermostats and generally lower settings can save money - even lowering a degree at a time can start some saving.

Check the impact of your daughter in college on your taxes and do it now. Do you qualify for any of the credits ? Also, check when her spring bill will be due and if it's better(and possible for you to pay it) in 08 or 09. Be sure to file a FAFSA as early as possible in 09 for the folling school year.

Someone else will probably mention it but you seem to have surprise expenses that could be planned for - birthdays come the same time every year, oil changes are due at the same mileage each time. I'd try to go through receipts and get more than a couple of months worth of data.

IMO - you need to focus on that big huge grocery/household/misc/cash amount first before worrying about the small change. The grocery amount is so big that it's really like having another misc category.

Obviously you (and DW) need to be the ones to decide what in the last category gets funded and for how much but I've put in some suggestions. And cutting things like cable etc that people suggested will give more money here. BUT this last section can't be MORE than the money left otherwise you're growing your CC debt not shrinking it.

And the bigger the final remaining number the bigger your snowball and the faster you get rid of your debt.

Then you need to actually control your spending. This is where the envelope method is excellent - because once it's gone it's gone.

My DD is attending a state college, albeit as an out-of-state student, so tuition is "reasonable". She received a couple scholarships, has maxed out Stafford loans, and has (and will be working). She is responsible for books, supplies and her living expenses. We hope this coming summer she can earn even more to add into the tuition. We make too much money for any Federal or state grants. We are taking on the reminder (10k this year) as a Federal Parent Plus loan. Repayments for us start in January, although we can defer repayment and accrue interest. One of the critical reasons that we have to manage this CC debt is that we CANNOT have adverse comments on our credit report as we then couldn’t qualify for the Parent Plus loan. If there is any legacy I leave it will be that at least I helped my kids through college and I don’t care if I have to work till I die to do it.

I can report she loves school and is blossoming and this is one of the very brightest parts of our life!

2. The expensive trips to MIL either have to go, or have to be greatly decreased in cost, or have to be saved up for in advance by cutting other expenses. Next summer could you possibly pay for your MIL to come and visit you?

I’m afraid my MIL’s is well for her age but really can’t travel comfortably. We likely had the last whole family vacation to see her. This is a source of tremendous guilt.

3. Can you get rid of the car that has the expensive car loan and you still owe $20k for it?

Car is a long story. It is upside down. Nothing fancy (Saturn Vue). Our second car is a beater (10+ years). I faced one of those dilemmas - had a Saturn Ion on lease, changed work location so I was running up mileage and was going to go over my limit, and DD needed automatic to learn to drive, SO I had limited options. Did the best I could at the time.

4. Food/household looks huge unless household is including things like repairs. Around here our food/household is basically food + household supplies that we buy at the grocery store. What is included in your category.

A couple posters have asked about this category – yes it is basically everything from the grocery store – food, household (e.g. detergent), and “personal” supplies (e.g., toiletries, make-up, etc). No repairs – this is in the “house & garden maintenance /repair” line.

$130/month seems high. Have you run through the drill on reducing electricity use? Turn off lights in empty rooms, always turn off monitors, reduce TV use, switch to cfl's etc, etc, etc? Just turning off our monitor made a noticeable difference in our bill.

We are getting aggressive here. I am powering down just about everything I can (like computer, router, modem on power strip). My DS has gotten in the act and is a on a tear to “turn out the lights if you don’t need them”. I suspect a big part of this is washer/dryer – we need to cut the number of loads per week. (DS is in sports so there always seems there is a dirty uniform to wash).

Phones - Cell $100.00 Phone - Landline $80.43

Do you *need* both a landline and cellphones? If so, have you considered a VOIP service such as Vonage? $25/mo is much better than $80. You can keep your current phone number.

Yea, this is a lot. The landline is unlimited long-distance largely so my DW can talk to her mother. My MIL doesn’t do cell phones! The cell phone is the lowest family shared plan for the four of us. Part of that is cell to cell is free (not counted in minutes) se we use this to communicate with DD at college. I need to research other options here.

Cable & Internet $107.70 Can you cut your cable back to basic?

This is bottom line basic cable + Internet we can get. No premium anything. We can’t get DSL.

Oil $400.00

Insulation? Plastic on the windows and rope caulk around doors and windows can work wonders. Do you keep your house on a programmable thermostat? Can you keep the thermostat lower this year?

We are going to be very aggressive about keeping heating costs down and pray for a mild winter.

Insurance - Auto $136.07 Higher deductible?

I have shopped around. Have some deductable, but without cash reserves I am scared to jack it up much further.

Water $55.96

You might find it worthwhile to ask everyone to really think about how they use water. Things like turning off the water while brushing your teeth, shorter showers, not leaving the water running while doing the dishes, and so on can add up as well.

Everything counts and we are cutting here. My DD was a notorious long shower taker, but now for most of the year the college foots that water bill now! Fewer laundry loads, etc.

It doesn't raise my ire, although it should have been a warning sign to you. Did you get a 30 year fixed mortgage? If not, when does your payment adjust? Because that's something that you need to plan for, too.

If you did get 30 year mortgages each time, just realize that not only did you increase your payments, you lengthened the time that it will take you until you have a paid off home.

The mortgage is fixed thankfully. And yes it doesn’t escape me that we traded a possibility of have a paid off house at retirement to pay off CC debt. Pretty foolish huh?

AJ – I really like the way you reformatted the “budget. Thank you. I am going to work in this format going forward.

Yea, this is a lot. The landline is unlimited long-distance largely so my DW can talk to her mother. My MIL doesn’t do cell phones!

MIL doesn't have to do cell phones for you to drop the land line.

You would have to watch the minutes and make sure you don't run into overages, but if all your calls to each other are free, why not spend the minutes you are paying for to let DW talk to MIL and drop the landline?

I'm not going to yell at you, because you're clearly yelling at yourself. And you're right when you say that the board distrusts easy-out methods of paying credit card debt, such as transferring the debt to the house, for exactly the reason that you mentioned: without a change in habits, the debt just runs right back up again.

Can I be a devil’s advocate? In other posts there have been strong options about using something like a home equity loan through a CU to consolidate debt. Can we debate the pros and cons?

This is something I have thought about. GIVEN a change in habits, and getting clear budget in place and sticking to it, such an approach would allow a fixed monthly payment and definite pay off date. Also aren’t there tax benefits to a home equity loan? And isn’t it better to have secured debt rather than unsecured (CC) debt? I am not looking for a quick solution, but what are people’s thoughts about the pros and cons of this?

I suspect a big part of this is washer/dryer – we need to cut the number of loads per week.

Don't use the dryer. Hang clothes outside on a line or drying rack. I have 2 racks that cost less than $20 each at Ikea.

The landline is unlimited long-distance largely so my DW can talk to her mother.

Change the landline to basic (shouldn't be more than $25/month, no long distance) and have her buy calling cards at Costco/Sam's. Does MIL have a computer? Email would then be free. Or get MIL a cellphone and she can call DW.

And isn’t it better to have secured debt rather than unsecured (CC) debt?

You think that losing your house is better than defaulting on a credit card?

Some people do use the HELOCs or refinance the mortgage and have good results. But those are people for whom the debt was a one-time event (job loss, sickness, and so on) and who are disciplined in their habits. Other people develop the discipline, they make the cuts in the budget, and they prove that they have changed their habits. THEN they use a HELOC or refinance to good advantage. But until someone has established good habits in spending and saving, putting more debt on the house will not help. You're shuffling the deck chairs on the Titanic.

You've refinanced twice, and each time you ran the debt right back up. Was there really an advantage to you in risking your house?

You can't afford to send her to school. Can she transfer to an in-state state school. Or if she is a frosh/soph can she go to the community college?

electrasmom

If she is doing great at her present school and is enjoying it, this is the one thing I would argue against cutting. It was very important for me to be at a place I liked and enjoyed when I was a student. Because of this I did very well, got two top scholarships and was able to pay my way to a top american school for graduate school.

I did my undergraduate studies in my home city and lived at home during that period so my mom was not paying any of my studies related expenses but my point is that it is important for a student to have an environment he/she enjoys. It is a good investment if that leads to a good performance.

Yea, this is a lot. The landline is unlimited long-distance largely so my DW can talk to her mother. My MIL doesn’t do cell phones! The cell phone is the lowest family shared plan for the four of us. Part of that is cell to cell is free (not counted in minutes) se we use this to communicate with DD at college. I need to research other options here.

A lot of cell phone plans are unlimited after 8 or 9pm at night as well as on weekends. If you are on teh east coast and MIL is on the west coast, your wife can still call her at a reasonable time your time from your cell phone plan (without a landline). Consider this.

I suspect a big part of this is washer/dryer – we need to cut the number of loads per week. (DS is in sports so there always seems there is a dirty uniform to wash).

Do you wash/rinse in cold or hot water? If hot, that could be an easy win.. a few bucks. I know you need more than a few, but the little habits do start adding up.

This is something I have thought about. GIVEN a change in habits, and getting clear budget in place and sticking to it, such an approach would allow a fixed monthly payment and definite pay off date. Also aren’t there tax benefits to a home equity loan? And isn’t it better to have secured debt rather than unsecured (CC) debt? I am not looking for a quick solution, but what are people’s thoughts about the pros and cons of this?

Well, it is most certainly better for your lender who would much prefer to be able tot ake your house if you default rather than simply chase you for the money.

I can't think of how a secured loan would be better for you....

As far as the given a change in habit and sticking to a budget....personally I would still not go for the loan secured by my house.

In your case, forgive me, but the change in habit and sticking to a budget is as yet an unrealized hope. It is not happened yet so this is pointless to argue now.

Having said that, I think you will find that if you do change habit and stick to a budget and keep good credit you may get permanent balance transfer options that would result in a lower interest rate than an equity loan even after considering tax deductibility.

When I came here originally, my debt was mostly at nosebleed rates, some of it in the 28% or so range. Within a fairly short time I moved most of it to lower rates. Now, the highest rate is 4.99% and most is at 3.99% or lower. So, an equity loan (even if wanted to take one) would not be less expensive.

Now let me address my overall sense of your responses. You have lots of good reasons for spending this and spending that. I understand. I've had those good reasons too.

Having been here for over 2 years now probably the most valuable thing I can tell you is that in the end none of that really matters.

You have the money that you have. You have to divide it up to figure out how to spend it. If you have $6000 to split up each month, it doesn't matter if you can come up with good reasons for spending $8000 a month. The reality is that you only have $6000. You will have to prioritize and cut to spend only $6000 a month. You get to choose how to do that. If spending $80 a month for a landline and $100 for a cell phone is worth it to you so be it. But that is $180 a month that you can't spend on other things. (BTW, we have Vonage with long distance and it was $25 a month, not $80. And, your wife surely can call her mom on the cell phone and just keep it within the minutes or call her on nights/weekends when minutes aren't counted).

I didn't see your daughter's school in your budget. Even if $10,000 a year that is still money that needs to be in the budget. And, frankly, it may be more than you can afford. If you want to prioritize affording it then fine.

But....your "pie" has to be cut in a way to include that expense. You can't just pretend that your pie got magically larger to accomodate it.

You have the money that you have. You have to divide it up to figure out how to spend it. If you have $6000 to split up each month, it doesn't matter if you can come up with good reasons for spending $8000 a month. The reality is that you only have $6000. You will have to prioritize and cut to spend only $6000 a month. You get to choose how to do that.

[...] If spending $[xx] a month for [xx] is worth it to you so be it. But that is $[xx] a month that you can't spend on other things.

[...] If you want to prioritize affording it then fine. But....your "pie" has to be cut in a way to include that expense. You can't just pretend that your pie got magically larger to accomodate it.----------------

This is something I have thought about. GIVEN a change in habits, and getting clear budget in place and sticking to it, such an approach would allow a fixed monthly payment and definite pay off date. Also aren’t there tax benefits to a home equity loan? And isn’t it better to have secured debt rather than unsecured (CC) debt? I am not looking for a quick solution, but what are people’s thoughts about the pros and cons of this?

Hi dpine:

Unfortunately you haven't shown the ability in the past to change your behavior. That's why the secured debt route is dangerous.

You will take an "easy" road to CC debt reduction, but you have in reality NOT reduced your debt. In fact re-financing in this manner usually adds some fees to your existing debt. Because you have not learned to just your lifestyle in this kind of scenario, you leave yourself open to running up the cards again.

This is something I have thought about. GIVEN a change in habits, and getting clear budget in place and sticking to it, such an approach would allow a fixed monthly payment and definite pay off date.

The GIVEN is the huge assumption. I would not say that it would be a 'GIVEN' until someone has lived with the new budget and habits for an entire year. That is so that they can demonstrate that they have made it through an entire year of "Oh, I forgot that thing that is due once/twice a year" in the budget.

For many people, once a year has passed, they have gotten most of the rates and total debt down to a level where a HELOC would be a higher interest rate.

Also aren’t there tax benefits to a home equity loan?

There can be. But there are limits, so each person has to run the numbers themselves. Plus, even with the tax benefits, the interest rate may still be higher than a good long-term BT rate on a credit card.

And isn’t it better to have secured debt rather than unsecured (CC) debt?

Better for who? The bank, so they have something to seize in the event that you default? Or you, so that you can lose your house if you default?

I am not looking for a quick solution, but what are people’s thoughts about the pros and cons of this?

The number of times that I have seen people come here and say that they successfully used their home equity to pay off credit card debt without running the cards back up is insignificant compared to the number of times that I have seen people say that they have taken equity out of their home, paid off credit card debt, and then run the credit cards back up again.

There have been several people on this board who have done it successfully, but in the successful cases, there was generally a budget in place (and followed) for at least several months, if not a year, prior to making the decision to tap the equity. There have been dozens, if not hundreds, who have failed at least one time, and some of them several times, when pulling equity from their homes to pay off debt.

It is critical to demonstrate the behaviors of budgeting and LBYM prior to excercising the option to pull equity from your house.

Yea, this is a lot. The landline is unlimited long-distance largely so my DW can talk to her mother...I need to research other options here....

This is bottom line basic cable + Internet we can get. No premium anything. We can’t get DSL.

A couple of things to consider: if you will be keeping the cable, maybe consider switching to VOIP (e.g Vonage). You can get a basic calling plan with 500 minutes for $14.99/month (with voicemail, caller ID, call waiting, etc).

Another option is to use electronic (or regular, but I think electronic is more convenient) calling cards. A good option is p1ngo (www.p1ngo.com; that "1" is actually an "i", but the TMF filters blocked it for some reason). The rates are reasonable, the access number is toll-free, and you decide how much you want to load on the card and how often. There are other good features, which you can read about on their website. This gives you the opportunity to eliminate landline entirely. If MIL needs to call and your incoming minutes are not free, you can always opt to call her right back if the math makes more sense that way.

My DD is attending a state college, albeit as an out-of-state student, so tuition is "reasonable". She received a couple scholarships, has maxed out Stafford loans, and has (and will be working). She is responsible for books, supplies and her living expenses. We hope this coming summer she can earn even more to add into the tuition. We make too much money for any Federal or state grants. We are taking on the reminder (10k this year) as a Federal Parent Plus loan. Repayments for us start in January, although we can defer repayment and accrue interest. One of the critical reasons that we have to manage this CC debt is that we CANNOT have adverse comments on our credit report as we then couldn’t qualify for the Parent Plus loan.

So please recognize that by doing this, you are adding to your debt, which will take away from your 'reasonable' "Household" spending level.

DO NOT defer the repayment. The interest rate on the PLUS loans is 8.5%. If you take out a $10k loan each year, and defer repayment until you have your credit card debt paid (hopefully in 4 years - when your daughter graduates), you will end up with $49,254 in debt - nearly equal to the amount of credit card debt that has you in a panic right now, and at a (slightly) higher interest rate than the interest rate on your current debt. And your daughter's graduation from college will be, conveniently, just about the time that your son is ready to go to college, right? So, if you defer payments on her loans, you will have to start paying them when he is ready to go to school, and you will have to take out loans for his college costs because you cannot manage to pay her loans and his costs at the same time.

You are sliding down a slippery slope here. You had said that you were eligible to retire with full benefits in 9 years. I see a minimum of 12 years of debt repayment in your future, with little ability to save for your retirement during those 12 years.

I would suggest that with the situation you have gotten yourself in, you cannot afford to pay for your daughter's schooling without significant increases to your income or significant changes to your life, as in selling the car and the house, and stopping any vacations to MIL.

GIVEN a change in habits, and getting clear budget in place and sticking to it, such an approach would allow a fixed monthly payment and definite pay off date.So would paying the CC's - assuming a snowball and a steady plan for payoff. The only difference is that with the CCs your payment would go down over time and with the HELOC it would not.

And isn’t it better to have secured debt rather than unsecured (CC) debt?YOU are securing the debt. With your HOME. If you can't pay the CC's you can declare bankruptcy and some of them may be dischargable in BK. If you can't pay the HELOC you get foreclosed on. What's better to you? Plus with a HELOC you will be paying for that ham sandwich 10,20,30 years from now. With a plan to pay of CCs you won't still be paying for them in 30 years.

Also aren’t there tax benefits to a home equity loan? Miniscule. You get a small part of your interest deductible. Whoop-De-Doo. I'd never risk my house for that.

Are you saying you have an extra unbudgeted $10K a year for student loans?!? Ai, yi, yi! Not to panic you - but that will add to your burden - not be dischargable in bankruptcy and mean you will have difficulty meeting even the "budget" you propose (which still doesn't balance and isn't a true budget).

Really - I don't mean to panic you, but you need to think out 2, 5 10 years and look at your overall debt obligations and financial goals. I strongly recommend having your DD take out these loans, not you. I took out some loans, and had them all paid off 5 years after graduating. This is not smart to take on more debt at a time when you can't even handle what you have.

<<You are sliding down a slippery slope here. You had said that you were eligible to retire with full benefits in 9 years. I see a minimum of 12 years of debt repayment in your future, with little ability to save for your retirement during those 12 years.

I would suggest that with the situation you have gotten yourself in, you cannot afford to pay for your daughter's schooling without significant increases to your income or significant changes to your life, as in selling the car and the house, and stopping any vacations to MIL.

AJ

>>

Yep. The children have to step up to the plate and take responsibility for the costs of their education. Mom and Dad should not be falling on their financial sword more than they already are.

Another thing to consider...IF you take on the student loans for DD, given your debt obligations and this house of cards you may find that you cannot do the same when DS hits college. That is likely to create family tensions.

And really, it isn't "help" anyhow. IMO you are destablizing yourself to help DD, and in the end it may sink you, which would be way more stressful to her than having some loans to pay off when she graduates.

You want to help DD - that's commendable. But you cannot afford to do so. Not without more income coming in. You wish to behave as if you are a family that can afford to self-fund college. But you are not. You need to put cards on the table with DD and tell her - and the whole family - the situation.

I think some of you have missed where dpine indicates that his DD has "maxed out" on her Stafford loans. So she is already taking out the maximum federal student loan help that is available to her. PLUS loans are parent loans, they are not available to students. Her only other option would be private student loans.

Which is not to say that dpine can afford the PLUS loans, because I don't think he really can. But it is not a matter of dpine signing for these loans in lieu of his DD doing so. She is not eligible for PLUS loans, and as dpine has indicated, she has already taken on the maximum federal student loans she is eligible for.

And isn’t it better to have secured debt rather than unsecured (CC) debt?

Only in the eyes of the lender.

Unsecured debt means there is nothing to reclaim or reposes if someone defaults on the loan. (hence credit card debt)

Secured debt means there is something to be reclaimed. (Mortgages and HELOCs are secured by the house, car loans by the car, etc.)

Lenders prefer secured loans because they have more options for getting their money back if you don't pay.

When you hear people saying secured debt is better than unsecured debt I think they are just making the moral distinction between mortgages and credit cards. Hardly anyone can buy a house without taking on debt, but we should be able to buy TV's without a loan.

And that's what a lot of students do, if their parents don't have the money to give and/or won't sign a PLUS loan.

I realize that this is a rock and a hard place situation. But dpine is putting himself in for additional debt, when he is already maxed out, and he already admits he may never be able to afford retirement. Essentially his daughter, and eventually his son, will be going to college on what would have been dpine's retirement fund. I know he said he was willing to do this, but the future holds a lot of fog, and he can't tell what might happen to him or to his wife. Old age brings illness, physical problems, oftentimes a reluctance on the part of employers to hire older people, and he can't assume that he will always earn a high enough income to support himself.

So if he can't support himself, or if he dies and his wife is left to manage the debts, she is really stuck.

As I said, I realize that this is a hard situation, and I recognize the reasons for his decision. But it could well come at a greater cost than he realizes.

Having been here for over 2 years now probably the most valuable thing I can tell you is that in the end none of that really matters.

You have the money that you have. You have to divide it up to figure out how to spend it. If you have $6000 to split up each month, it doesn't matter if you can come up with good reasons for spending $8000 a month. The reality is that you only have $6000. You will have to prioritize and cut to spend only $6000 a month. You get to choose how to do that.

[...] If spending $[xx] a month for [xx] is worth it to you so be it. But that is $[xx] a month that you can't spend on other things.

[...] If you want to prioritize affording it then fine. But....your "pie" has to be cut in a way to include that expense. You can't just pretend that your pie got magically larger to accomodate it.

DM - this really boils it down doesn't it. A real gem of advice - should go in the FAQ.

The number of times that I have seen people come here and say that they successfully used their home equity to pay off credit card debt without running the cards back up is insignificant compared to the number of times that I have seen people say that they have taken equity out of their home, paid off credit card debt, and then run the credit cards back up again.

There have been several people on this board who have done it successfully, but in the successful cases, there was generally a budget in place (and followed) for at least several months, if not a year, prior to making the decision to tap the equity. There have been dozens, if not hundreds, who have failed at least one time, and some of them several times, when pulling equity from their homes to pay off debt.

OK, OK I give. It’s clear that the collective wisdom here is that a home equity loan to consolidate the CC debt has no “pros”. And we can’t be trusted anyway…..

IMO - you need to focus on that big huge grocery/household/misc/cash amount first before worrying about the small change. The grocery amount is so big that it's really like having another misc category.

Lael – I really like the way you have suggested a hierarchy of spending and setting priorities. I think I will turn this into a spreadsheet where I can plug in numbers and test out different assumptions. Thank you.

DO NOT defer the repayment. The interest rate on the PLUS loans is 8.5%. If you take out a $10k loan each year, and defer repayment until you have your credit card debt paid (hopefully in 4 years - when your daughter graduates), you will end up with $49,254 in debt - nearly equal to the amount of credit card debt that has you in a panic right now, and at a (slightly) higher interest rate than the interest rate on your current debt. And your daughter's graduation from college will be, conveniently, just about the time that your son is ready to go to college, right? So, if you defer payments on her loans, you will have to start paying them when he is ready to go to school, and you will have to take out loans for his college costs because you cannot manage to pay her loans and his costs at the same time.

You are sliding down a slippery slope here. You had said that you were eligible to retire with full benefits in 9 years. I see a minimum of 12 years of debt repayment in your future, with little ability to save for your retirement during those 12 years.

I would suggest that with the situation you have gotten yourself in, you cannot afford to pay for your daughter's schooling without significant increases to your income or significant changes to your life, as in selling the car and the house, and stopping any vacations to MIL.

I said we could defer the payments but we are not planning on doing that. This first loan will start repayment in January and should be about $150/month - yes to add to the list.

In my original post when I said was I was consumed by all this is because I know we are “sliding down that slippery slope” at a pretty good rate of speed I might add. And it’s scary.

That said, a number of folks here have said in our situation we cannot expect to help pay for our DD’s college education. OK I understand that on one level. However, I don’t care. My DD has overcome many barriers to achieve what she has and she is blossoming on so many levels. I will do whatever it takes to help her – MY value is that I owe her this and I will do whatever it takes to leave this legacy. And make no mistake - she is working, and taking on a sizable chunk of debt herself to go to school.

About “retirement”. What I said was that in nine years I would be eligible to retire from my current job with a full pension for life (as well as great medical, and other benefits in retirement), but I have no illusion that I will not be working. I expect to get another job and use the pension payments to either pay debt (I hope that we will be out of that mess for the most part by then) or plow as much as possible into retirement savings.

***********************************************************************************************I have to sign off for now. We have reached a point of informational and emotional overload. I knew when I posted our story in grim detail the feedback would be helpful, but also knew it would be brutal. And it has been. I feel worse than I did before I posted, but I know I have work to do and now have some very good "leads".

Thank all of you for your advice and support. We’ll be back in October to give the September run down of our “count every penny spent” exercise, and maybe I’ll have a proposed budget then too.

7. Camp fees, etc. Nope. The answer to "mommy & daddy can I?" is NO. Heck No. Not a chance in heck, No. Sorry, but we can't afford it. Period.

Or you could say to your younling: We can't afford it, but if you raise the cash you can.

This would help to get him involved in the budget, spur his creativity & also he may find he has an entrepreneurial(sp?) streak. And he would not have to miss out on the things that her *really* wants.

I have to sign off for now. We have reached a point of informational and emotional overload. I knew when I posted our story in grim detail the feedback would be helpful, but also knew it would be brutal. And it has been. I feel worse than I did before I posted, but I know I have work to do and now have some very good "leads".

Even if you don't post, I hope you'll continue to read the board. Reading how other people are dealing with debt, reading articles that are occasionally posted about credit, can help give you more ideas how to cope with the debt, and can strengthen your determination and resolve.

And I know you think your treatment was harsh, but if you want to read brutal, you should read what determinedmom went through. Now THAT was brutal.

First of all, congratulations on completing the first step to financial independence...realizing you've been a fool ;) I admitted this myself three months ago. Welcome to the club, My DW and I make 140,000/year and are on the road to paying off $220,000 in debt, we should be done in 3 years.

Second, here's a good book that you should borrow from the library, because you need to admit that you can't afford to buy it. Its called "The Total Money Makeover" by Dave Ramsey. Some of the Fools here are already familiar with Dave. Warning, there is Christian content in the book, but even secular types like myself think this is a great "how to" guide for getting out of debt.

The most powerful thing I've learned is that the debt is just a symptom. The disease is living beyond your means. You guys have offered a lot of rationalizations as to why you need to spend $8000/month when you only make $6000/month. That needs to stop (now) if you're ever going to get ahead of this.

Second, you need to take a look at ALL of your family's debt as the enemy. Stop thinking that there is such a thing as "good" debt. There is only bad debt and worse debt when it come to personal finance (investing is another matter IMHO.) That means that your car note, student loans, CCs, HEL, mortgage note, etc. all need to be identified as part of the debt albatross around your neck. Picture what your life would be like without a car payment, CC payment, dentist payment, student loan payment, or even mortgage payment. How well would you sleep at night? Think about whatever is most important to you and think about how being completely debt free would affect it. That's the goal, don't let go of that.

Now on to the mechanics...

IncomeLet's look at your income. We need to maximize this. Are you eligible for any overtime at work? Extra shifts? Bonuses? You make good money, you don't need a second job to make ends meet but any extra dough you can bring in will help pay down that debt faster. Also, you're paying about 20% in income taxes on your earnings. That seems high for married, two kids, w/ itemized deductions. If your tax refund is over $500 then you're withholding too much and should adjust your W-4. Don't make tax free loans to the government. Its better to pay a few hundred bucks in April than the lose out on monthly income all year long for nothing. Your budget should be based on what you make right now and that's $6613/month.

ExpensesNow the expenses. This is where mindset is everything. Let's assume that your utilities (oil, water, electric, garbage) and insurance expenses (auto, home, life) are set in stone, everything else is fair game. Let's see where we stand:

Net Income 6613.25

ExpensesUtilities (622.46)Insurance (229.88)

Balance 5760.91

Starting at the top of your list, the mortgage is debt but it's the last thing we'll pay off. For now let's treat it as an expense. As for property taxes, make sure you file a challenge EVERY time the govt tries to raise your tax value. Submit justification based on recent sales in your area that are less than what they assesses you at. Don't make it easy for anyone to take money from you and your family. For now we'll assume you're stuck with it.

I'm assuming that you pay about $50 for internet (cable modem) and 57 for basic digital cable? Switch your internet service to the slowest broadband service they have. It should be about 786Kbps and cost around $25, trust me they have one. I am an IT guy and switched my service two months ago when we got serious about this debt thing. My downloads are a bit slow but for surfing and email, you can't really tell. I can even telecommute and not notice. Trust me this is a no-brainer. As for Cable TV, I wouldn't want to live without it, so I won't ask you to either. Should reduce this bill to about $80.

Newspaper subscription needs to go. Unless you are a coupon ninja and can somehow manage to save $16/month plus the cost of a grocery game subscription. If you can, then great! The subscription will pay for itself and we can leave it out of the budget. Let's assume you get rid of it.

The Telephone Landline needs to go away, ASAP. If you only use it to talk to your MIL, then you're flushing money away. Two words... nights and weekends :) If you really want to call her whenever, for however long, get her a cell phone on your family plan. It'll cost you like $20/month and Grandma will never be out of touch. Let's assume this goes away.

$100/mo for a family plan sounds reasonable, might want to get a plan that includes text messaging because DD is going to college and DS is starting high school. On Verizon I think its $20 a month, I'd make the kids pay for it ;) Let's assume that stays put at $100.

You're currently saving $216.67 per month for emergencies... guess what? When you're living beyond your means and not living on a realistic budget, EVERYTHING IS AN EMERGENCY. We're going to change that, trust me. The savings needs to stop, we'll address emergencies in a moment.

So, that covers all of your non-debt, fixed expenses. Let's see where we stand...

Set these bills up the pay automatically from your bank's online billpay system. Note, under no circumstance should you ever give a company you do business with access to your checking account. Make sure YOU are initiating these transactions because you never know when you may have to prioritize to the point that someone doesn't get paid on time.

Okay, now that the "hard landscape" has been defined, we need to look at the your discretionary spending. Personally, I call everything that doesn't have a regular monthly payment "discretionary" because I decide how much to spend on it.

You're minimum debt payments come to $1513 which includes your Car note, CCs, and dentist payments. That leaves $2383.39 left for discretionary spending and a debt snowball. That is not a lot of money considering what is currently in your discretionary bucket. Let's tackle the discretionary items one at a time...

*Groceries + Restaurants + School lunches ~ 1965/mo. avg.

This is obviously the 800 lb. gorilla in the room. Look at it and realize it needs to go on a diet. There are only 3 people under your roof. Assuming a 30 day month, you have averaged $655 per month per person on groceries! You should be able to easily halve this number. There are many families in New England living well on $200 per person per month. I've heard that a teenage boy consumes his own weight in food every day, or something like that... Plan you meals every week, make a shopping list from that, only buy what's on the list. If you need help with this, please post more details or where your grocery money is going. An auditor would say that you must be buying cocaine or something with this money. You must reduce this to $200 per person per month or else I'm afraid this isn't going to work. $500 per month for groceries, okay? Something should be carved out for restaurants because let's face it, you can't always eat in. $100 is a reasonable amount to set aside for the occasional fast food or casual dining meal but pay cash and when it's gone, you're eating at home. So $600 per month for food, trust me, it can be done. Next victim.

*Clothes ~ $174 - 734

I hereby grant yo permission to spend money on yourself! Now you do it... didn't that feel good? I know that when I first realized that I was in debt up to my eyeballs, everything I bought made me feel guilty. I feel better now because I have budgeted $200 per month for clothes for me and my wife. We don't spend it all every month but we carry the balance over to the next month so that next time I need a new suit, we can afford it. Allocate $100 per person per month ($300) for clothes and keep track of it. That way your clothes may go out of style but it won't be old and worn because you have budgeted enough to keep your wardrobe in good shape. This should allow you to buy shoes, underwear, shirts, pants, outerwear, etc. when you need to without suffering later. The $734 you spent in July would have been fine if you had saved up for it. So $300 for clothes per month.

(We have $1483 left, for those of you playing at home :)

*Medical expenses (Prescriptions, doctor's visits, etc.) ~117

Looks like you have some monthly prescriptions and some doctor's co-pays. Do either of you employers offer a flexible spending account for health care expenses? This lets you set aside pre-tax money for these expenses as well as OTC medications, glasses, dentist visits, contact lenses, etc. Since these expenses are pretty predictable it makes sense to have the money taken out of your paycheck and then reimbursed to you from that fund. This should save you 20-25% (your likely marginal tax rate) on these expenses that you can then adjust you withholding to compensate for. I'm assuming that your family spends more than this some months for things like glasses, contact lenses, allergy meds, etc. Let's budget $150 for this item.

*Gas ~$500

Unfortunately, gas prices are what they are and I can't assume that you are able to drive less. If you can, that's great. You will save some money by selling that SUV and buying an older station wagon, more on that later. For now, let's leave gas at $500

*Haircuts/Personal Care

This another area where you need to give yourself permission to spend money on yourself. Getting out of debt is no excuse to look scraggly. I think $100 per month is a safe bet here. That's a haircut every 3 weeks for DS and yourself as well as a $75-$100 clip for DW every three months. (At lest that's what my DW thought was reasonable.)

*Pet Care ~$27-218

Fido and kitty deserve to be taken care of but there needs to be something set aside for them so that their health emergencies don't become financial emergencies. You know that they need food of course, but you also know that they are going to need regular visits to the vet to stay healthy. Let's assume that $50 per month will take care of them. That's $600 per year, enough for food, toys, check-ups and the occasional trip to the ER.

*Auto repair and maintenance $54.51 in August.

You have one old care and one new car (not for long.) Your cars need to be regularly maintained and that shouldn't be a big surprise. Fluids need to be changed, tires, wipers, shocks and struts replaced and stuff will break that needs to be fixed. These things are generally not emergencies because they're expected. You need to go the a good auto parts store and buy a repair manual for your used car. It will explain how to perform all regular maintenance on your vehicle and how to tell when it needs to be done. Congrats, you are now a shade-tree mechanic. Oil changes, belt and battery replacements and tire rotations are now your job. Leave brake jobs, tire balancing, shocks, struts and mufflers to the pros (but shop around and haggle for the best price.) I picked those basic maintenance chores because they don't require special tools other than some wrenches, a jack and some jack stands. Avoid dealer service bays unless its covered by a warranty. This allowance includes car wash SUPPLIES (yes you're washing your own cars.) You should be able to meet these needs with $50-$100 per month per car depending on how old it is. Let's call this $100 per month.

*Home and Garden MAINTENANCE ~257

You have a home and it needs to be MAINTAINED. I'm talking maintenance as opposed to upgrades. This is important because I suspect you included in this category everything you've spent at The Home Depot. Maintenance and repair includes anything you'd look at and the first phrase out of your mouth includes the words danger(ous), costly, hurt, liable, break, collapse, pest, rotten, rodent, trip, mold, burn, flood, slime, opossum, fire, freeze, burst, poison, smoke or explode. Upgrades typically elicit thoughts that require the words cozy, privacy, warm, cool, neat, organized, pretty, better, shinier, new, paver, save money, efficient, environment, sustainable, finished, green (unless describing mold or slime,) improve, or sunlight (Note: Except in combination with the repair words above. For instance "That finished attic would provide a cozy place to organize my comic books if only it didn't have the rotten roof section that collapsed when the opossum walked on it and let the sunshine in." should probably be fixed.) Budget $200 per month for maintenance and repairs and learn how to fix stuff yourself. There will be plenty of funds around for improvements once you're out of debt.

So we've got $383 left for everything else... this is the part where the blood is shed >:(

Donations, Gifts, Entertainment, Camp/Sports fees, Travel, and your slush fund that is "cash" and "misc." All of these items have to fit within the remaining $383. How can this be done? well, these are the lifestyle choices. These are some of the sacrifices that your family is going to have to make.

Sports feesYou should start by explaining to your son that you can't afford the fees for his sports. Maybe there are sports that he can play through the public schools that don't require large monthly fees. You can't afford this luxury, sorry.

EntertainmentI've managed to save a lot of money on entertainment by discovering the library and parks systems. I know there are a lot of things to do as a family in New England that don't involve spending lots of money. You should set aside some money for this but realize that its just enough so that you don't feel poor. Budget $50 in cash per month for this one. Treat yourselves to the occasional matinee movie or festival/fair.

Vacation/TravelThis is a tough one. Grandma's not going to be around for ever and you shouldn't deny her access to her grandkids. Your MIL will probably understand if YOU can't make it ;) $100 per month would cover flying MIL to you a couple of times a year or one family road trip to visit her. Or a couple of plane tickets for DW and DS to visit her.

GiftsAnother tough one. Your kids need to understand that this is tough for you and DW as well. Getting out of debt will allow you to take all of the money you currently give away to banks and spend it on the things you think are truly important. $50 a month will allow for some modest gifts. Unfortunately, this coming Christmas will need to be good company and arts and crafts.

DonationsI firmly believe that everyone should give something of themselves back to their community. A simple way to do that is by donating money to causes you believe in. Unfortunately, it's not that simple for you. The only thing you have to give is your time. Volunteer with your son and DW for some good cause. For instance, you could volunteer at a soup kitchen for Christmas since you won't be exchanging expensive gifts. I recently realized that I've been a paycheck away from homelessness a couple of times in my life... how about you?

Slush FundsWe all have them... places where we keep money in some sort of untraceable, unrecognizable form. Guess what? That needs to stop. I'm serious. Every dollar you earn needs to have a purpose and its up to the members of your family to hold each other to that commitment. If you give DS $20 (scratch that... $10) to go out. It needs to come out of somewhere, like the "Entertainment" budget, or the "restaurant" budget. I have allowed myself $50 per month for things that I'm not smart enough to categorize... like when I bought Quicken to organize my finances (dumb mistake, but that's for another post). If you think you need it, try allotting $50 per month for stuff you're not creative enough to categorize.

We're left with $133 to accelerate the payment of your debts.

Enough bloodletting, now onto the meat and potatoes!

$133 per month

That's not a lot of money but watch where I'm going with this. We need to start with a proper accounting of your debt. What I see is this...

Essentially, what we're going to do is list all of your debts from highest tax adjusted interest rate to lowest and start the snowball by paying that $135 along with the minimum payment for the highest interest debt. We are NOT going to refinance anything else, or transfer any balances or rearrange anymore deck chairs on this Titanic. The few bucks you save in interest is not worth the risk of getting hit with fees or of running the debt back up.

Open that spreadsheet and plug in your debts, their current balances and their interest rates. Then choose the "highest interest first" method and take a look at the payment schedule. Now choose the "Snowball (lowest balance first)" method. See the difference in total interest paid? It's about $600. The other difference between the methods is that the "snowball" method provides a psychological boost because your paying off stuff quickly at first and it gets exciting. Personally, my smallest debts also have the highest interest rates so I'm doing the interest rate sort. I don't care which method you use as long as it works for you. Another thing to note is that all of your debt will be paid off in about 50 months. That's not great, but its a start. Now let's see how we can knock this out quicker.

First thing we need to do is get rid of some of this debt is to try and offset it with some of your stated assets.

*Emergency FundLet's consider your Emergency fund. The E-fund is sacred for some people. It allows a sense of security for people until they realize that it isn't enough to carry them through a real emergency because of all the risk they took on because of debt. I thought Dave Ramsey was crazy when he suggests that $1000 is a suitable E-fund. That is until I realized that the 3k I was holding onto wouldn't carry me through a real emergency such as cancer, job loss or a death in the family that we had to cover the cost of. What will $1000 carry you through? 90% of crises that don't fall into one of our budgeted categories. Pet illness? check. Major car repair? check. Need to fly to DD and help her cope with something? check. MIL is ill and needs the family now? check. So I propose that you put $2000 from your e-fund and pay off debt (I'll tell you where once we've identified all of your offsetting assets.)

*Taxable investment accountThe investment account you have labeled Vanguard needs to be liquidated and put into our offset fund. There is no sense in earning a meager return on some money when you're paying exorbitant interest rates on other money... it's a net loss. It doesn't matter if this is a college fund or whatever, the best use for it right now is to pay off debt. Add $4000 to our offset fund.

*Roth IRASee above and apply it to the contributed principal for your Roth. You can withdraw that money because you've already paid income taxes on it. Don't touch any interest though, that's not worth the penalties. I'm going to assume that 6000 of that $9000 is principal for math purposes.

Liquidating these funds is tough but it will be much much easier to replace them and more once you're out of debt completely.

Total offset fund = $12000

Let's take this $12000 and pay off credit cards starting with the highest interest rate and move our way down. That cuts your total debt to 58781 and according to the spreadsheet you should be done paying on it in 39 months (highest interest method.) Mind you, this is not counting any income increases or windfalls you may incur.

*CarYes, your car is an asset. I'm talking about the Saturn Vue that you're making payments on. No it's not yours, it's the bank's and you're probably upside down on it but that's okay. Everyone makes mistakes. Buying a new car is a big one. If you sold it and bought a beater car with cash. You would have to allot $100 per month for maintenance and repairs but you'd likely recoup that in gas and insurance savings. You'd save the $433 car payment and cut a good bit out of your debt. The problem is that you'd only get about $10000 for your SUV. So you'd need to put the remaining $10000 on a credit card. It's okay though, you aren't incurring any more debt because you're just rearranging it. I don't know if this would be the best move though because it seems like it would only knock about 3 months off the pay off time once everything is taken into account. What do the other Fools think? Is this worth it?

In any case, we've managed to go from "holy mac how can this be done!" to "hey, I can be debt free except for my house and crazy DD student loans in just 39 months!" and it only took like 20 pages of text :)

Seriously though, you shouldn't be going 40k into debt just because DD wants to go to an out of state school. Not to mention her going into deep debt herself with student loans. Try and convince her to transfer to an instate school. In any case, you should consider not taking out any more of those PLUS loans. They are going to kill your retirement and seriously hamper your ability to help DS when it comes time for him to go to college. If you do the same thing for him you'll have 80k in debt by the time you retire.

I think I've typed enough. I'm going to sit back and wait for the screaming to start. Hope this helped. Good luck.

Even if you don't post, I hope you'll continue to read the board. Reading how other people are dealing with debt, reading articles that are occasionally posted about credit, can help give you more ideas how to cope with the debt, and can strengthen your determination and resolve.

And I know you think your treatment was harsh, but if you want to read brutal, you should read what determinedmom went through. Now THAT was brutal.

Wishing you well.

Nancy

Heh heh heh.... dpine doesn't even know what brutal means; I didn't weigh in on his situation.

With everyone (?) using cell phones lately, it seems that no one has mentioned "onesuite.com" for long distance, which is about 2.5c minute (plus a bonus if I refer you..)but a couple points...

m-i-l doesn't DO cell phones may mean that she does have trouble listening to cell phone calls, or maybe a "someone is listening in" paranoia.My sister doesn't like it when cell phones "cut off" and sometimes says "call me back on a NORMAL phone!"

I wonder about the discomfort of M-i-l traveling; how elderly IS this person?

Of course with my dad being 93 I understand seeing old folks. Fortunately I've been able to get his financial assistance through the manager of his funds.

If she is doing great at her present school and is enjoying it, this is the one thing I would argue against cutting. It was very important for me to be at a place I liked and enjoyed when I was a student.